Tag Archive | BEE

Broadband allocation on its way

Minister wants BEE ownership in broadband…..

sent to clients 20 March….As if nobody knew already, the Minister of Telecommunications and Postal Services,cwele Dr Siyabonga Cwele, told Parliament that broadband allocation is perhaps the biggest regulatory bottleneck in the South African deployment of wireless technologies.     He said, at the same time, he wants to see Black owned companies have their fair share of allocation.

However, both he or his department (DTPS) and the regulatory body ICASA seem to be at odds on the system needed to allocate the spectrum, particularly in the area of setting aside sufficient spectrum to support Black broadband development and ownership specifically.    The fight to deliver urgently more high-speed bandwidth to South Africans generally is being slowed down it seems by this difference in opinion expressed.

global broad bandPresumably, the delay is all about whose satellites we use – Chinese, Russians or the US accompanied by an intelligence risk – or do we go via the masts owned by the private sector. Minister Cwele probably suspects any such deal with the private sector will not serve black interests in the proper manner. Digging trenches and laying down optic line cannot be any kind of answer.  In telecommunications all is political, rather like the nuclear issue and the similar problems faced by department of energy – the political structure overlays the practical answer.

Dr Cwele has now said the final policy paper is on its way to Cabinet.

One on one

In an extraordinary meeting with the Portfolio Committee on Telecommunications and Postal Services, both parties explained their views with the views of MPs to be added to what has become a national debate dominated to an extent by Minister Cwele’s views.

The background to the impasse is that the Electronic Communications Act empowers the Minister to issue policy directives but ICASA does not necessarily have to accept such. To distill the views of each into a few words is difficult but clearly the driving principle behind Dr. Cwele’s approach is an allocation which favours black transformation in control of spectrum whereas ICASA prefers an allocation more on an “auction” basis, whereby bidders not only name their price but then add their additional contributions to Black upliftment and general social development.

cell phone mast graphicVodacom, MTN, Telkom, Cell C and Neotel have in the past sunk enormous sums into the development of communications structures but the current delays in allocation are, according to reports, hurting the industry but their BEE structures are shallow, say insiders.

Dedicated view

Industry sources said before the meeting “Minister Cwele is seized with the need to transform the sector to ensure meaningful Black participation but spectrum allocation cannot be granted in the same way as the granting of concessionary mining licences, for example, if Black empowerment is the goal.”

The principles of the allocation process as stated by DTPS are indeed noble, as quoted in the relevant draft Policy Paper before Parliament, which state that the aims of the allocation policy are to:

• Promote the effective and efficient management of spectrum to ensure
  agility, flexibility and adaptability in spectrum administration
• Reduce bureaucracy and streamline processes for spectrum assignment
• Support the attainment of the national broadband targets set out in the
  South Africa Connect programme at speeds and in the time frame outlined
• Provide clarity on the treatment of spectrum in instances where demand exceeds supply
• Set aside spectrum for use on an open access basis with joint private sector investment
• Support the provision of, emergency services, safety and security and sector-specific operations

Milder

In the parliamentary debate, Sipho Mjwara, Acting DG, DTPS, was more conciliatory and said the spectrum was a public resource belonging to all people and DTPS had to apply itself on how to deal with this for the benefit of all. Currently the spectrum was operating on a first come, first serve basis but this principle certainly did not benefit all. He said there were “barriers to entry for small companies and artificial monopolies helped little.”

This was followed by comment from the Deputy Minister, Prof Hlengiwe Mkhize, who said it was “more logical” not to shrink away from exercising the mandate of DTPS to follow the NDP on broadband roll out. “The pillars that need to be in place must include those that had previously been excluded”.

Money must talk

Pakamile Pongwana, CEO of ICASA, responded that from an international perspective it was no longer the policy,icasa ceo as had been the case in the past, of getting maximum fees into the fiscus but the needs of complete coverage of the country. It was a combination of coverage and fees, Pongwana said.

Germany had raised money from the spectrum divide, he said, but they had included a proviso that bandwidth would only be released when rural areas had been covered. He added that other countries were already looking at 5G networks while South Africa was still looking at LTE use. “We have to stop playing catch-up”, he said.

War of words

From the debate between all groups, DTPS, ICASA and parliamentarians, it became obvious that there is an ideological battle going on. The industry sees the independence of ICASA as regulator at stake, industry sources say. The Minister said he had looked at the idea of the allocation of “set asides” for high demand spectrum but added “the Department wants the whole pie to be available for all South Africans. We are in a situation where a duopoly owns 80% of the spectrum.”

However Pongwana concluded, “The allocation of spectrum was the country’s policy choice and the assignment would be by the Regulator and be in line with procedures. While there was long term licensee allocation there was short term spectrum allocation and the Department wanted to give certainty to licensees.”

Money, money, money

moneyOn the question of infrastructure spend, DDG for ICT Infrastructure in the DTPS, summarised government views in the meeting when he said that in a country like South Africa with infrastructure and access gaps, the question had to be asked whether the country wanted to raise money as its main goal. He said it was more about service and reaching all South Africans as part of the NDP but in an equitable manner.”

Whether it would be for free or go to the highest bidder were questions the DTPS was considering as it looked at all approaches. It would probably not be for free, he said, but there had to be a compromise where small companies are not at the mercy of big companies “because of market power relations.”

The Minister concluded that all in DTPS were listening to the views of the public and industry.

Ministerial clusters.

The next step before submission of the new Spectrum Policy to Cabinet during March was to consult with the particular clusters as part of the ICT Policy White Paper procedure. Once the Spectrum Policy had been approved by Cabinet and gazetted as part of the ICT White Paper, ICASA could proceed with the licensing process on the agreed basis.
Previous articles on category subject
Lack of skills hampering broadband rollout – ParlyReportSA
Overhaul of broadband policy underway – ParlyReportSA

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BEE: Davies drives on with Black Industrialist Policy

Report on Black Industrialist Policy awaited….. 

sent to clients 21 January….  The Black Industrialist Policy, now in place and engineered by the Department of Trade and Industry (DTI), is due to be debated in Parliament early February.

ack bdlive

ack bdlive

A progress report will be made by Trade and Industry Minister, Dr Rob Davies to the relevant portfolio committee shortly. The plan was submitted to Cabinet by and approved in early November 2015. The purpose of the policy, the Cabinet said at the time, was to focus on growth and competitiveness of Black-owned enterprises.

The plan is designed to “facilitate the meaningful participation of Black-owned and managed companies within industry” and is another extension to DTI’s Industrial Action Plan (IPAP).  It backs up, Minister Davies said when launching the programme, both the NDP and President Zuma’s nine-point plan laid out in the 2015 State of Nation Address.

More Black control releases more State money

The scheme offers a cost sharing grant with the DTI, ranging from 30% to 50%, to approved entities to a maximum of R50m.   The value of the grant in terms of any proposal will depend on the level of Black ownership and management control and must be for capital investment and other support measures, such as working capital.

Minister Davies said in his launch parliamentary media briefing  that a number of private banks black ownershiphad  approached DTI prepared to partner with government on the initiative. He said the idea was “to unlock the industrial potential that exists within Black-owned and managed businesses through deliberate, targeted and well-defined financial and non-financial interventions.”

Focus on Black ownership

Not mentioning job creation specifically, he said that his department particularly wanted to “speed up the entry of Black industrialists to enter strategic and targeted industrial sectors and value chains.” “South Africa will not be able to industrialise to maximise growth “unless it simultaneously includes the Black industrialist on a sustainable basis”, he said.

Manufacturing core needed

Minister Davies said that the only route for future of the economy was to build the manufacturing sector and the inclusion of the black industrialists and manufacturers had to be encouraged.

The DTI had earmarked R1bn of seed capital to assist the Black industrialists to raise the necessary equity required to access the private sector/banking market to access debt funding, he said.  This capital would be complemented by funding from developmental finance institutions.

He added that while incentivising the inclusion of the Black industrialists in the manufacturing sector, the parties involved “needed to be committed, willing to take risks and be willing to look for long-term returns and not short-term rents.”

” This policy proposes focused efforts to facilitate inclusion and participation of Black industrialists in manufacturing activities, with an understanding that more equal societies tend to grow faster than those that are unequal,” said the Minister.

Opposition members will specifically ask how this programme has contributed to job creation.

Previous articles on category subject
SA’s economic woes not BEE, says DTI – ParlyReportSA
25.1% is maximum BEE control, says DTI – ParlyReportSA
DTI does flip flop on BEE codes – ParlyReportSA

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BEE : Black Industrialist Policy ready to go

DTI with further Black industrialist plan…..

The Black Industrialist Policy is now in place engineered by the Department of Trade and Industry (DTI andBEE image approved by Parliament. It was submitted to Cabinet by Trade and Industry Minister, Dr Rob Davies and approved in early November. The purpose of the policy, the Cabinet says, is to focus on growth and competitiveness of Black-owned enterprises.

The plan is designed to “facilitate the meaningful participation of Black-owned and managed companies within industry” and is another extension to DTI’s Industrial Action Plan (IPAP). It extends, Minister Davies says, the NDP and President Zuma’s nine-point plan laid out in the 2015 State of Nation Address.

More Black control, more money

The scheme offers a cost sharing grant with the DTI, ranging from 30% to 50% to approved entities to a maximum of R50m. The value of the grant in terms of any proposal will depend on the level of Black ownership and management control and must be for capital investment and other support measures such as working capital.

Minister Davies said in his media briefing relayed on the parliamentary precinct that a number of private banks have already approached DTI prepared to partner with government on such an initiative. He said the idea was “to unlock the industrial potential that exists within Black-owned and managed businesses through deliberate, targeted and well-defined financial and non-financial interventions.”

DTI, he said, particularly wanted to “speed up the entry of Black industrialists to enter strategic and targeted industrial sectors and value chains.” According to Minister Davies, South Africa will not be able to industrialise to maximise growth “unless it simultaneously includes the Black industrialist on a sustainable basis.”

It all comes back to manufacturing

Rob-DaviesDavies said that the only route for future of the economy was to build the manufacturing sector and the inclusion of the black industrialists had to be encouraged. The DTI has earmarked R1bn of seed capital to assist the Black industrialists to raise the necessary equity required to access the private sector/banking market to access debt funding. This capital would be complemented by funding from developmental finance institutions.

He added that while incentivising the inclusion of the Black industrialists in the manufacturing sector, the parties involved “needed to be committed, willing to take risks and be willing to look for long-term returns and not short-term rents.”

” This policy proposes focused efforts to facilitate inclusion and participation of Black industrialists in manufacturing activities, with an understanding that more equal societies tend to grow faster than those that are unequal,” said the Minister.

Previous articles on category subject
SA’s economic woes not BEE, says DTI – ParlyReportSA
25.1% is maximum BEE control, says DTI – ParlyReportSA
DTI does flip flop on BEE codes – ParlyReportSA

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Special cabinet statement might correct damage to SA

Editorial…..

At last, a sensible special cabinet statement……

Sent to clients 15 Jan…On 13 January, a Special Cabinet Statement was issued and, as compared to previous irregular missives, the word “special” indicated some hope.   Instead of just containing the usual reasons for having to rejoice on certain public holidays, details of the passing of MK operatives and certain Bills approved, the latest document was full of economic facts and financial fiscal information placing a positive spin on the current economic gloom. At last, an acknowledgement that there is a hand on the tiller.

Clearly there has been a palace revolution, if only in this sphere alone.

As the Cabinet Lekgotla is planned, Parliament also prepares to receive it’s parliamentarians all fresh from the respective political party get-to-gethers. A lot has changed since they all parted company and quite likely a lot more is to change before MPs gather for their first meetings.

No doubt the EFF will try to make a circus out of things but nevertheless the show will go on.    However, EFF or not, it is becoming more and more difficult to sort out between political comment, which is not our focus, and the mechanics of State policy and its direction, oversight on financial issues and legislative alerts that affect business and industry.

Bad four days

Rob-DaviesRed lights are flashing in all camps, not least of which is the fact that it is difficult to tell who did the most damage to South African markets – China or President Zuma. In parliamentary terms, the Portfolio Committee on Trade and Industry seems determined to stand by SACP Minister of Trade Industry, Dr Rob Davies, in all matters dealing with BEE and trade agreements- as does DTI itself – and the Public Works Portfolio Committee seems unable to wear down SACP Minister, Jeremy Cronin, on issues regarding the Expropriation Bill.

Similarly, Lumka Yengeni’s Portfolio Committee on Labour Committee has no hope of a good outcome when it ordered, in the last session, an end to the shambles and confusion in Minister Mildred Oliphant’s Department of Labour, another Kwa-Zulu appointee of President Jacob Zuma.

Always a problem

Finally, despite some excellent MPs from all parties sitting in the Portfolio Committee on Energy, the vague report backs made to them by Department of Energy is leading to a sense of frustration in that particular Portfolio Committee which is not effective either as a result. In the area of good communications, Minister of Energy, Tina Joemat-Pettersson can only be described as a menace.

The good news is that stalwart ANC Joanmariae Fubbs remains Chairperson of the Trade and Industry Portfolio Committee  and holds the ship steady with her disciplines. SACP executive Yunus Carrim stays as Chairperson of the Standing Committee on Finance and one wonders if he will see eye to eye in view of his ideologies with Minister Pravin Gordhan.

Overlooked as well

A Jacob Zuma appointee, Ebrahim Patel of COSATU fame but a hard worker and very leftist, remains Minister ofebrahim patel Economic Affairs but even he was overlooked for Minister of Finance when the President came up with name of David van Rooyen, who, to be quite frank, we had great difficulty in recalling his presence in Parliament over the last few months. A close shave but costly.

Back onto legislation. Whatever happened to the Private Security Industry Bill nobody knows but one hopes that the President was not using it to play silly games with the Obama administration on the AGOA issue. Maybe it gets discussed at the Lekgotla. Maybe not.

Politics ahead of economics 

In the meanwhile, one hopes that the message is got through at the Cabinet Lekgotla that what the President says vitally affects each one of his citizens and that that the private and personal politics being played out at the moment are particularly damaging to the business of Parliament and its relationship with commerce and industry.

Just as importantly, there has to be a better understanding in government departments when reporting to Parliament why business institutions need clarity of policy to gain investment confidence.

opening parliamentParliament is an important and independent tool of democracy in the fight against autocracy but so many departments seem more in awe of the auditor general than they are of the need for answers to parliamentary questioning and attempts to get the truth.

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SA’s economic woes not BEE, says DTI

BEE and economic climate not connected…..

lionel october 3In his introduction to the Department of Trade and Industry (DTI) presentation to Parliament on the current position with regard to the implementation of Black Economic Empowerment (BEE) as of August, 2015,  DTI’s DG, Lionel October, said that contrary to some claims, BEE was nothing to do with the many economic problems that beset South Africa.
In his overview, before discussing the detail of the B-BBEE Act, the Codes and Sector Charters, October said he wanted place the need for urgent transformation in its proper context. He said that indeed South Africa, as an emerging economy, had been hurt by global factors recently by Chinese currency interventions and originally by its own energy supply problems.

Key to future, says DTI

However, he said, economic transformation in the form of black advancement, procurement from black entrepreneurs, the transfer of basic mineral wealth into beneficiated products and a rebuilt and transformed manufacturing sector held the key to development.   BEE was nothing to do with the pervading “doom and gloom” scenarios that were persisting in business and industry circles.

Lionel October said “things now needed to be speeded up”. He claimed that the country now had all the legislation, tools and direction needed to contribute the shortage of jobs and quoted JP Landman by saying that South Africa faced a further problem that population growth of 200,000 births a year more than the previous year every year was as much a problem currently, he said.

The big sell

In tracing the development of BEE since the commencement of the B-BBEE Amendment Act in 2014, the adoption of the B-BBEE Codes of Good Practice in May this year, DTI had held 46 workshops to explain and help in the development and understanding of the need for black empowerment. It was not a racial issue, he insisted, but a programme of necessity if South Africa was to survive economically.

He said that the process of establishing at BEE Commission was at “an advanced stage” – the new acting commissioner having been announced recently.

B-BBEE ACT trumps all

Acting chief director of BEE at DTI, Liso Steto, then reported that the new “trumping” provision in the Broad-Based Black Economic Empowerment Act will take effect in two months time when the 12-month transitional period expires. An example of “trumping”, he explained to MPs, was if, for example, a government department put out for tenders and ignored the provisions of the B-BBEE Act. In that case, the Act would “trump” any regarding the tenders.
This trumping therefore, he said, will take precedence over any other law and relates to all other instruments of black economic empowerment, such as Codes of Good Practice and Sectoral Charters. The provision would come into effect in October 2015, by regulation.

Codes get to nitty gritty

On Codes, Steto said, the major development had been the issue of relating “employment equity” to “management control”, with the latter now being the uniform name. Also “preferential procurement” and “enterprise development” were merged for evaluation into one element re-named “enterprise and supplier development”.

Minimum requirements had been introduced for “ownership”, “skills development” and “enterprise and supplier development”, as above.

Fighting “fronting”

Acting DG Steto re-confirmed that 25.1% remained as the target for black ownership. Emphasis was laid on the expression “true ownership” when explaining the 40% sub-minimum applicable on the net value of ownership in the hands of black people. Only investments regulated and based in South Africa will qualify as a “mandated investment”.

On Sector Codes, it was confirmed that ten sectors had been given extensions since 2013 but the final, final date was now October 2015 for all sectors. To date tourism, property, agriBEE, forestry, the media, advertising and communication were in line for approval. The process of aligning the mining charter with the liquid fuel charter had begun.

Split must come

Rumour has it “in the corridor” that these will eventually be split but the whole issue of the implementation of the Minerals and Petroleum Resources Development amendments have to be resolved before such an event can even be considered, resulting in this be an issue way into the future.
Questioning from MPs was limited, a concern being expressed by parliamentarians that the whole issue of verification agencies had to be speeded up by DTI and re-clarified. Lionel October said this was a priority.
MPs also complained that the threshold increase for BEE exempt micro enterprises, now being introduced, from R5m to R10m seemed a strange move if the idea was to develop more small manufacturing businesses but DTI responded that their view was different and the necessity to reduce red tape in the SMME world was essential.

Other articles in this category or as background
25.1% is maximum BEE control, says DTI – ParlyReportSA
DTI does flip flop on B-BBEE codes – ParlyReportSA
Equity quotas court ruling affects BEE legislation – ParlyReportSA
B-BBEE Codes of Good Practice far more onerous – ParlyReportSA
One year to implement B-BBEE Codes – ParlyReportSA
Liquid fuels industry short on BEE charter – ParlyReportSA

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25.1% is maximum BEE control, says DTI

DTI upbeat on implementation of BEE codes…..

lionel october 3

In a report to Parliament on the amended BEE Codes of Practice and their implementation as from 1 May 2015, Lionel October, Director General of Department of Trade and Industry (DTI) and his B-BBEE staff team, emphasised that the generic scorecard was aligned to government’s key priorities. He also said the State had no ambitions to take their target on black control beyond 25.1% of ownership.

Supplier Development is new title

DG October said the main emphasis of the codes had now switched to greater emphasis on what was previously termed procurement – now referred to as “supplier development”. This approach was more in alignment with the National Development Plan (NDP) objectives, DG October said, simply because that was the main direction needed to empower the development of black enterprises and build the economy on a stable growth path.

“In fact the German auto industry working with the German Chamber of Commerce had established a fund

BMW-Werk Südafrika

in South Africa”, he said, “for financing, training and building expertise in black businesses to supply the auto industry”.

There was considerable discussion on this by members and DG October said that there had been a general recognition in business and industry of the word “must” had replaced “may” in terms of B-BBEE requirements; that level four had to be reached for incentives and in general now “certainty” had been restored to the business environment on BEE issues, he felt.

Five “Elements”

The generic scorecard now had five elements, he said, which all companies, except those micro-exempted, had to comply with for recognition. All employment equity and management control had now been merged into one of those elements, now termed “management control”.    Sector codes were now to be aligned by 1 Nov. 2015, as set out in Code 003.

He said that “in response to public submissions” the import exclusion principle would be maintained and that the definition of an “empowering supplier” in the context of code alignment was a compliant entity which could demonstrate that its production and/or value adding activities were taking place in this country.”

DTI said that that “deviations of sector codes in terms of targets must be over and above those of generic codes and companies that derive more than 50% of revenue from sectors where there is already a sector code must be measured in terms of that sector code.”

DTI has no doubtful intentions

George Washington, having cut down the cherry tree, with his fatherIn general, DG October said in response to questions from MPs about the amendments, it had been his impression that business seemed to accept there were no political mala fides on the part of DTI; just a wish to get on with the planned NDP growth path which required the co-operation of business and industry on black empowerment.

The funding of Sector Charter Councils was a “joint responsibility between government and the private sector and entities must report annually on their B-BBEE status to sector council who will in return reports to the BEE Commission”, DTI said.

New sectors in the sights

Sector codes were being considered for the tourism, which had reached the stage of gazetting for public comment; “alignment” was being reached in the construction, integrated transport, ICT, financial services and chartered accountancy sectors; the property and forestry sectors had reached gazetting stages and marketing, advertising and communication were with their appropriate ministries for approval.

DG October mentioned the fact that the manufacturing industry stood alone as there were so many different sectors but over a period, aspects would be dealt with such as the film industry and textile and clothing industry.

DTI concluded their input to the meeting by advising that a technical assistance guide to B-BBEE was in process and DTI were in the process of finalising the B-BBEE verification manual.

Recent faux pas

rob davies2Opposition members asked how it was that DTI went so wrong with the question of  downgrading the pointing system for employment schemes and why it was that the Minister of Trade and Industry, Dr Rob Davies, had to retract that portion of the amendments which were not gazetted for public comment.

Chairperson Joan Fubbs intervened at this point, noting the Minister had taken the blame, had apologised for the mistake and could do no more than admit that DTI had been wrong.

DG October added that at a DTI workshop on the subject with “some stakeholders” this direction had been considered as a good option for broader rather than narrow empowerment but it had now been recognised by DTI that “they had gone down the wrong route as far as investor confidence was concerned”.

DTI had now reversed everything with the promise that this would not occur on the agenda again.

Better ideas could come

It had also been realised that such a move could also destroy imaginative plans for black management control such as that pitched by Standard Bank where 40% shareholding went to staff who could have representation on the board; 40% went to recognised BEE shareholders and 20% went into community organisations and trusts.

In answer to direct questioning by MPs, DG October confirmed that by the term “black”, DTI translatedlionel october this as African, Coloured, Indian and Chinese. He also confirmed that all these groups, if foreign and not South African citizens, were excluded.

More than 25.1% “unrealistic”

DG October, when asked by ANC MPs whether the 25.1% target for black ownership was realistic and fair considering that the demographics in South Africa demonstrated a far larger proportion of black people, he said that 25.1% could be considered as a “basic critical mass to engender a solid forward movement”.  To go any further would be unrealistic, he added.

In Malaysia, he said, local ownership was considered fair at 30% and other African countries as high as 50%, but he felt that in South Africa, where the need for the transfer of skills and training from large to small companies, especially through supplier development by state utilities and large businesses, was essential, this was a fair percentage assumption and which called for co-operation and fairness between all parties, all bearing in mind “a pretty hideous past”.

Redress of the past in all preambles

joan fubbsAt this point, Chairperson Joan Fubbs referred to the South African Constitution, reading out the clauses which not only stated that all were equal despite race colour or creed but that discrimination was possible if it was fair and she reminded MPs that redress of the past was “fair”.

She asked for all “not to isolate clauses in the Codes to determine personalised interests but get on with job of re-aligning communities that had been excluded from ownership for over 300 years”.

One ANC MP asked that the focus on big businesses be less emphasised and that DTI rather spent considerably more time with the job of developing ownership of black small business, which he stated could be “the power house of South Africa”.

He called for legislation that enforced government and public utilities, “as custodians of state power” to set an example on supplier development since, he said, one could hardly expect the private sector to follow suit, if the SOEs did not lead the way on this issue.

Incentives needed, not law says DTI

DG October said such sort of things were “impractical in the real world” and said the main challenge was a phased process of change which now had the support of many in positions of power in business. He also emphasised that B-BBEE had to tie in business and industry with incentives rather than with the law.

When asked about his recent public statement that he had set DTI’s target to produce “100 black industrialists”, he was referring rather to 100 black industrial leaders “financed and supported by DTI initiatives”.

Other articles in this category or as background
BEE comes under media scrutiny – ParlyReportSA
Rumblings in labour circles on BEE – ParlyReport
B-BBEE Codes of Good Practice far more onerous – ParlyReportSA
One year to implement B-BBEE Codes – ParlyReportSA

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DTI does flip flop on BEE codes

B-BBEE codes changed on “management control”…

Rob+DaviesA  lack of understanding of the effect of B-BBEE Codes on business and the industrial environment, despite a workshop on the subject, was demonstrated when the department of trade and industry (DTI) amended its own amendment in a matter of days on the point scoring issue in terms of broad- based employment share ownership schemes.

More emphasis has been placed in the Codes generally on procurement from black business, now referred to as “supplier development”.

As you were…

However, the minister of trade and industry, Dr Rob Davies, confirmed in a statement that the second amendment corrected the changes as far as employment schemes were concerned and any such changes would not be retrospective on deals already done, such earlier deals continuing to reap the same benefits under B-BBEE Code pointing as before.

Control is everything

Minister Davies said that DTI still had a think tank operating on how further to make BEE in generalplan BEE more effective insofar as pressure on business was concerned to effectively ensure that management, control and ownership by black persons was increased.  His task team appointed would report back by the end of the month. He repeated this in his budget vote speech.

DTI completely avoided established government procedure by issuing an “explanatory notice” to a gazetted publication on B-BBEE procedures by announcing a completely new aspect on the rules on B-BBEE award-pointing, in this case termed as “amending guidelines”, thus avoiding the issue of public comment.

Most worrying was the fact that minister Rob Davies failed to make any reference to this in his earlier introduction to DTI’s strategic plan to Parliament a week before, subsequently presented to the portfolio committee on trade and industry by DG Lionel October and then to the select committee on economic affairs in the NCOP.

Forgot the union movement

Just as as business leaders were, so was the trade union movement, many of whose members are part of share employment schemes, options or not, and are therefore touched on the issue of reduced profit and dividends.

As far as not mentioning this in a budget vote speech, which was an excellent opportunity to inform business, there is fine line, say opposition members, between failure to disclose to Parliament and avoiding a contentious disclosure to Parliament that that might compromise a negotiation but in this particular case of changes to B-BBEE, the matter  appears to have only involved some members of cabinet and certainly none of the large spectrum of stakeholders involved. It all came as a big surprise.

The minister has published two further notices on the amended B-BBEE Codes regarding the second phase now implemented. The Chamber of Mines was yet another body caught by complete surprise, thinking that their relationships, in this case the minister of mineral resources, were far better than they actually now seem to be. There seemed to be a vacuum in communications.

DTI has now reported to Parliament on subject

To the rescue...

To the rescue…

DTI, in the form of DG Lionel October, has since reported to Parliament on the subject of the amended B-BBEE Codes of Good Practice and explained that Minister Davies had admitted that DTI had taken the wrong route with all good intention “to take a narrower view on black management control” but now had apologised for the descision, now reversed, on this aspect of the pointing system. All is reversed, retrospectively as well.

A full report is with our clients with further comments by DTI on the Codes and their application as revised “after the event”.     This analysis of DTI’s presentation will be archived to this website in the course of time.

In the meanwhile, we note that there is useful extra-parliamentary political comment on http://www.polity.org.za/article/da-geordin-hill-lewis-calls-for-debate-in-parliament-over-elitist-bee-codes-2015-05-08

Other articles in this category or as background on this website
http://parlyreportsa.co.za/bee/dti-earns-ire-parliament-bee/
http://parlyreportsa.co.za/bee/liquid-fuels-industry-short-transformation/
http://parlyreportsa.co.za/bee/one-year-implement-b-bbee-codes/
http://parlyreportsa.co.za/bee/b-bbee-codes-of-good-practice-far-onerous/

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Budget vote speeches: Out of touch with each other

Editorial….

DTI does flip flop on B-BBEE pointing…..

elephant and bayThere have clearly been were two big elephants in the room during budget vote speech time in the National Assembly over the last two weeks – Eskom and BEE.    Then, suddenly, with DTI reversing their decision to reduce B-BEE pointing award benefits for broad-based employment schemes – one of the elephants disappeared.  It was an amazing flip flop in government policy.

But in actual fact this represents no change, in reality – just simply the fact that the whole structure of what was proposed was seen by all as impractical, unenforceable and to industry, unacceptable.

Backstage dramas

Whether it was business and industry pressure that forced the change, the Chamber of Mines or even the trade union movement itself, after two surprising gazettes announcing reduced awards in terms of black empowerment for broad based shareholder schemes, including employee schemes so carefully Rob+Daviesworked out in the last two years, and the second gazette correcting the fact that such changes were not retrospective, what happened behind the scenes will never be known. We think it was minister Rob Davies himself who put his foot down.

In a private comment, when sympathising with the minister for having to reverse his department’s announcements so publicly, his answer was “When something goes wrong you have to put it right.”  We admire for that and told him so.

Energy issues remain at the core

As far as the first elephant in the room, the energy crisis, it remains.    Unusually, this year despite all the speeches, the amount of media briefings and portfolio committee debates, including the millions of rands spent on airfares with some forty odd departments and SOEs fielding full teams reporting, it was only the minister of energy, Tina Joemat-Pettersson, who really tackled electricity and the issue of Eskom – all the other ministers appearing avoiding the issue like the plague, even public enterprises.

Correcting the past

What indeed was noticeable, at portfolio committee level as well, that each reporting team and each minister seemed to be more anxious to report on transformation and state ownership issues, as if some very clear dictate had been received that the ANC was not delivering on its election mandate in these areas and this was really the main priority.

Whilst lip service seems to have been paid, and then only in some instances, to the need for foreign investment and issues of the country’s rating image, the lacklustre address by the minister of trade and industry gave only more credence to the belief that redress for past injustices was the only big elephant in their lives and in Union Buildings.

Transformation not economics at forefront

In the committees, where all departments have been reporting on progress towards annual targets, this now being the last quarter, the most important slide in any PowerPoint presentation (following clarity on the audit process) was always the racial makeup of the department concerned in terms of reaching transformation targets and what race ratios currently existed. The theme was obvious.

We have listened to many thousands of words spoken over the month and more is yet to come as we write, but it is all too evident that there is a massive discord between business and industry and President Zuma’s cabinet on priorities.

Final word

Trade and industry minister, Rob Davies, warned parliamentarians in his budget vote speech, when mentioning BEE matters , that members should  be aware that the President had indicated that the central task was to bring about radical economic transformation.      Which really said it all.

Posted in BEE, cabinet, Cabinet,Presidential, earlier editorials, Finance, economic, Fuel,oil,renewables, Trade & Industry0 Comments

DTI earns ire of Parliament on BEE

 

Lack of BEE transformation flagged….

plan BEEThe divergence of views on BEE between the parliamentary committee on trade and industry and the department of trade and industry (DTI)  heightened recently with committee chairperson, Joan Fubbs, demanding that within seven days a “technical explanation” as to why  DTI was not hastening speedy transformation within South Africa.

A full report on Broad-Based Black Economic Empowerment (BBBEE) had to be submitted. to all the members of her committee on progress, or the lack of it in certain areas and the reasons why,  she said, and this was to be submitted before the Christmas recess for further debate in the New Year first session.

Uphill presentations

After a presentation on the current position regarding BEE as a broad subject, Ms Nomonde Mesatywa – chief director of DTI’s BEE secretariat – ran into heavy traffic upon her failure to quantify the nature and amount of research that had been conducted on the success or failure of BEE and the total lack of data on its implementation in her presentation.

The governing party MPs bitterly complained regarding the “soft nature” of recent BBBEE legislation, including the recent BEE Amendment Bill and the powers and suspected lack of ability of the proposed BBBEE Commission to enforce any of the current legislation.

Ms Mesatywa went through the standard briefing for the benefit of newer MPs to explain that the Act had been amended and promulgated in January 2014 to ensure standardisation in reporting from all sources reporting across the economy; the BBBEE Commission having been established to monitor and evaluate BBBEE processes.

The new amendment, she said, aligned the anchor legislation with other legislation impacting on BBBEE and with the Codes of Good Practice.  All the provisions had come into effect on 24 October 2014, she said, except for the trumping clause (section 3), which had been deferred for 12 months and would come into force in October 2015.

DTI said the alignment of sector charters was at an advanced stage and included the construction, property, tourism, transport, financial, mining, chartered accountancy, forestry, agriBEE and IT charters.

Elite only benefitting

Committee members from both the opposition and governing party both lodged complaints that there was a public perception that it was only the black elite who benefited from BEE programmes and there was little factual evidence to the contrary that “ordinary black South Africans” were benefitting.

The Democratic Alliance said it was totally offensive that the state offered a reward to companies only if they complied with BEE regulations and if they did not do so, not only could they not do business with the state but also not with any other companies that dealt with state. The DA described this as “awful”.

The EFF was called to order for suggesting that economic transformation would only be realised “if the ANC was taken out of power” but it was the ANC who sought clarity from DTI on how the new mechanism of using a commission in terms of the new Bill could possibly monitor and evaluate compliance “to ensure that the Codes of Good Practice were taken seriously.”

Long term view

DTI responded on the basis that they had been “overseeing, monitoring, and evaluating black empowerment for a long time” and they wished to assure parliamentarians that they had the experience to do this.

With regard to research generally on the subject of BEE compliance, DTI said their the original survey of some ten years ago showed pretty dismal results at around “level four” but DDG Mesatywa said the latest surveys were on the DTI website and had risen to “level eight”.

The chair commented that such kind responses were vague and unhelpful and the nature and lack of adequate quantitative results was unacceptable and, rather than return for a further presentation in view of the Christmas recess, DTI were instructed to respond in writing to Parliament giving exact numbers on it success or failure, sector by sector, within seven days.

ParlyReport will ask for this document.

Other articles in this category or as background
http://parlyreportsa.co.za/bee/court-ruling-equity-quotas-affects-bee/
http://parlyreportsa.co.za/bee/liquid-fuels-industry-short-transformation/
http://parlyreportsa.co.za/bee/one-year-implement-b-bbee-codes/
http://parlyreportsa.co.za/bee/bee-comes-under-scrutiny/

Posted in BEE, Facebook and Twitter, Finance, economic, Labour, LinkedIn, Trade & Industry0 Comments

Liquid fuels industry short on BEE charter

Fuel industry attacked on BEE …

On the subject of black economic empowerment  (BEE), acting director of the department of energy (DoE), Tseliso Maqubela, told Parliament, before it went into short recess, that the major target for his department was to ensure a more immediate transformation of the liquid fuels industry.   Economic transformation in the energy sector was a top priority, he said, and he told the portfolio committee on energy that much more was needed to be done by this sector to improve the situation.

This was reminiscent of similar complaints made of the mining industry under the same BEE charter by the director general of the department of mineral resources.

Victor Sibiya said, as DoE’s  deputy director of petroleum products, also acting, that one of the three pillars of his department’s programme was compliance, monitoring and enforcement and whilst 30% of petroleum licensing permits showed around a 50% compliance factor this was not enough and new legislation was on its way to “toughen up” on B-BBEE regulations.

New code called for

The challenge at present, he said, was that the process of penalisation was far too cumbersome and did not deal sufficiently with repeated offenders.   A revised code was urgently required, he added.

On a separate subject, Sibaya said that as far as the basic fuel price (BFP) was concerned all calculations were based as if the final product had been produced in South Africa.  DoE was at work, he said, on a paper studying the various elements that contributed to the BFP, particularly with regard to smoothing out fluctuations to the consumer and attempting to align municipalities to the magisterial zones which governed the distribution.

Retail margins were also being studied in a second round of estimations working with operations carried out by what was referred to as the “DoE model service station”. Other factors included the shortly to be published biofuels price schedule which would govern the mix with petroleum products.

Reaching out

Further to economic transformation programmes, Sibaya spoke of a programme to establish fuel stations in deeper rural areas supplying other forms of energy needed by households such as LPG and extending services to include food, household retail goods and community services to improve quality of household life amongst the poor, another NDP priority.

In broad terms the acceleration of LPG supplies to rural areas, in fact to all areas in general, would contribute greatly, he said, to this objective.

Acting DG Tseliso Maqubela said he would respond to the parliamentary enquiry on the volatility of fuel prices in a prepared paper shortly, as this issue was also in the process of being studied at present. When asked about the levy on purchase of vehicles and where the funds went, Maqubela said this was in national treasury’s domain and was “probably an attempt by treasury officials to mitigate on carbon emissions”.

Refinery decisions

Touching on petroleum issues, DG of energy policy, planning and clean energy, Ompi Aphane, told the committee that a decision would be taken during 2016 on expanding oil refining capacity in South Africa based on the conclusions of the liquid fuels infrastructure plan.

Contributing to the basic costs of energy at the moment in South Africa, he said, were current world tensions particularly in the Middle East.   Self-dependency, however, was unfortunately only a long-term goal, he said.

A similar plan to increase refining was an increase in gas supplies based on the current gas usage master plan that had been started and this programme would be concurrent with an urgent expansion of gas storage facilities in the country.

Minister weighs in

Most of parliamentary question time was occupied by the new minister of energy, Tina Joemat-Pettersson, who spoke broadly on energy issues; the fact that she recognised the need for urgent decisions by her ministry; and the necessity for her recently launched ministerial advisory committee on energy to receive input “in order that the opinions of all stakeholders can be considered.”

Such a ‘brains trust’, she said, should also include representation from the portfolio committee on energy itself.

Other articles in this category or as background

http://parlyreportsa.co.za//?s=bee+liquid+fuels

http://parlyreportsa.co.za//bee/eskom-black-owned-coal-mining/

 

 

Posted in BEE, Energy, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Special Recent Posts, Trade & Industry, Transport0 Comments

New Employment Equity Act gives shock

Employment Equity regulations published…

menfolk  The reality of the Employment Equity Amendment Bill passed in Parliament last October, now an Act, is beginning   to kick in with the enforcement of  regulations which, of course, are extra-parliamentary. The recently published regulations are not what were expected on the race issue, insofar as equity returns are concerned.

Oddly enough there were few objections or queries on the Employment Equity Bill when the draft Bill was presented for public comment by the department of labour (DoL) over eighteen months ago and the legislation looked destined for an easy passage through Parliament.

1994 critical date

In an unusual turn of events, the Employment Equity Bill, when introduced into Parliament, allowed for foreigners whose applications for citizenship were turned down before 1994 on the basis of their skin colour and such persons can be included in employment equity (EE) returns in future. This occupied much of the discussion in Parliament.

Fines were proposed as related to turnover of the entity in question, which could fall into eleven categories varying from agriculture to manufacturing, quarrying and mining to catering and transport and from wholesale, trade and commercial agencies to finance and business services.  Electricity, gas and water were mentioned, as was construction and community and personal services – all with total annual turnover thresholds given.

Worry was criminalisation

Most public comment in the parliamentary public hearings warned of the Employment Equity Bill criminalising business and strong objections were voiced on this issue.

Furthermore, the provisions of the Bill allowed for all white, Indian and coloured women who had been gender disadvantaged in terms of statutory law at any stage will also qualify for inclusion in terms of equity reporting. The Employment Equity Bill was the third in a raft of four new labour bills presented to Parliament last year.

In its briefing to Parliament before the parliamentary public hearings, DoL suggested to parliamentarians that “business and industry has been riding roughshod over the law which had been unrevised for nearly 15 years and it was time now that provision was made in their budgets for considerably more than the negligible fines of the past.”

National demographics the decider

At the time of the Bill, it was assumed by most in the public hearings that the reference to “equity in terms of national or regional demographics” would mean that employers could set equity targets or make plans as called for in what could be interpreted as reasonable and according to the geographic area each company or entity was located.

The Bill said that “guidance would be given” on this provision by the DoL. The Bill was passed and became an Act with, as always happens, the regulations awaited – a matter then purely between DoL and the employer.

It appears from press reports that the regulations “giving guidance” on the issue of race demographics are a far more contentious item than the issue of the fines objected in the public hearings in Parliament.

Still applies to min of 150 employed

The employment equity plan that each company must draw up, it is reported, now call in terms of the regulations issued for the targets to represent national demographics, not regional demographics as was expected, but still wherever the entity is of 150 employees or more wherever that entity is located.
It is unlikely that this matter will be debated in Parliament again, since a legal challenge might only result in that particular regulation being revised – unless of course the whole Bill is overturned constitutionally, which would seem most unlikely.
Previous articles in this subject
http://parlyreportsa.co.za//bee/employment-equity-amendment-bill-looks-set-easy-passage/
http://parlyreportsa.co.za//labour/employment-equity-bill-criminalises-offenders/
http://parlyreportsa.co.za//bee/turnover-fines-employment-equity-breaches/
http://parlyreportsa.co.za//bee/court-ruling-equity-quotas-affects-bee/

Posted in BEE, Labour, Trade & Industry0 Comments

Women Empowerment and Gender Equality Bill

50% equity Bill for women headed for law….

black white womenThe Women Empowerment and Gender Equality Bill, drafted by the department of committee on women, children and people with disabilities and tabled before Parliament, demands 50% equity in all businesses for women where “decision making processes” are concerned.

The Bill  appears to have been passed by cabinet, although not making it through first base with NEDLAC. Having had such a response by cabinet, presumably from the President himself, it is highly possible that the Bill will be powered through this last parliamentary session of the present government. The Bill was tabled by minister Lulu Xingwana.

BUSA strongly objected

In its parliamentary phase after tabling, Business Unity SA (BUSA) objected to the Bill in a submission stating that there was absolutely no need for such legislation when laws were already in place covering black equity in which the subject of gender equity or equality was adequately covered.

BUSA argued that in terms of the suggestions made in the Bill, called the Women Empowerment and Gender Equality Bill, such a Bill would attempt to override legislation already in place such as the B-BBEE Act and Employment Equity Acts, this particular Bill calling for 50% equity for women in “decision making areas”.

No labour pool for such law

BUSA called the Bill “unacceptable and unrealistic”, adding that in most cases the labour pool from which the particular type of work envisaged would not even contain a 50% reserve of women. The DA said the Bill was probably unconstitutional.

Some attempt to justify the Bill was made by the department on women, children and people with disabilities at committee level when they said the Bill would not have been approved by cabinet unless government was serious about the fact that only 20% of top posts in business were occupied by women.

A spokesperson said for the department subsequently said that the Bill might initially apply to possibly as yet undefined bodies such as state boards and political formations, which again the DA referred to as “cannibalising” existing state institutions.

The Bill never made it past the NEDLAC process last year but in the last days before Parliament closed in 2013, the Bill appeared on the tabled list and comments were called for by Parliament in the early portion of the 2014 session.

The Bill has now been debated in Parliament, that debate and the issues involved being with our clients before posting on this site. The Bill will undoubtedly be passed in the light of the passion by the minister for the Bill, with opposition members across the spectrum voting against or abstaining.

Previous articles referring to this subject

http://parlyreportsa.co.za//bee/employment-equity-amendment-bill-looks-set-easy-passage/
http://parlyreportsa.co.za//bee/court-ruling-equity-quotas-affects-bee/
http://parlyreportsa.co.za//labour/employment-equity-bill-criminalises-offenders/

Posted in BEE, Facebook and Twitter, LinkedIn, Public utilities, Trade & Industry0 Comments

Equity quotas court ruling affects BEE legislation

Employment equity quotas as numbers only struck down….

On equity quotas, the Employment Equity Act, as anchor legislation, and thus the recently approved Employment Equity Amendment Bill, has come under query as a result of a recent case heard in the Supreme Court which has found the Act is in default where numerical formulas only are applied to racial quotas in order to comply with regulations.

In fact numerical quotas are illegal, said the Court. In dealing with case before it, the Court found that this had been applied, the appellant failing to achieve an appointment based the fact that racial quota targets had been applied in terms of black empowerment legislation.  The defendant was the minister of police.

The court further found the Act in contradiction of itself by being unfair if it regulated itself to achieve employment equity with just numbers, as distinct from “preferential treatment and numerical goals” being applied, as has been applied in government circles elsewhere.

A whole host of applications applied by many government departments would therefore seem to be in contravention of the Act, since many departments rigidly use number quotas to achieve equity targets across a wide range of the public service.

Posted in BEE, Cabinet,Presidential, Facebook and Twitter, Justice, constitutional, Labour, LinkedIn, Public utilities, Security,police,defence, Special Recent Posts, Trade & Industry0 Comments

One year to implement B-BBEE Codes

B-BBEE Codes of Practice far more onerous….

The final Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice (Codes) have been published. Companies will be granted a one-year transitional period to align with and prepare for the implementation of the revised Codes.

Trade and Industry Minister Dr Rob Davies has stated that the amended codes are a “new beginning” aligned to government’s transformation ambitions and follow a period of much debate and which were earlier released in October last year.

The revised codes deliver a reduction of elements, from seven to five, within the generic scorecard, comprising ownership, skills development, enterprise and supplier development, management control and socioeconomic development, and changes to the points required for compliance.

The codes set the minimum requirement for ownership at 40% of net value, with skills development accounting for 40% of the total weighting points, and enterprise and supplier development required a subminimum requirement of 40% within each enterprise and supplier development element, namely preferential procurement, supplier development and enterprise development.

Now five elements

All companies, barring micro enterprises, will be required to comply with the five elements of the B-BBEE scorecard including  all organs of state and public entities; and  “natural or juristic persons who conduct a business, trade or profession in South Africa, which undertakes any economic activity with organs of state or public entities.”

There is an increased threshold in points required to achieve a better B-BBEE status and exempted micro enterprises have now a threshold of R10m and general companies, known as QSEs, have a range of R10m to R50m.

On the new enterprise and supplier development enterprises totalling 40 points, 23 points are required as black ownership majority. Procurement is down to 12 points, of which only five points relate to all suppliers with black economic empowerment credentials, three points to qualifying small enterprise suppliers and four points for exempt micro enterprises with a 15% target each.

No help to importers

Commentators have pointed out that many companies acquire total, or at least most of their imported goods on international markets and this will place them a complete disadvantage. The amended codes outline in much more clarity that large companies are required to comply with all three priority scorecard elements – namely ownership, skills development and enterprise and supplier development.
Refer to articles in this category
http://parlyreportsa.co.za//bee/bee-comes-under-scrutiny/
http://parlyreportsa.co.za//bee/turnover-fines-employment-equity-breaches/
http://parlyreportsa.co.za//bee/mprda-bill-causes-contention-parliament/
http://parlyreportsa.co.za//bee/new-b-bbee-bill-avoids-circumvention-of-the-law/

Posted in BEE, Trade & Industry0 Comments

B-BBEE Codes of Good Practice far more onerous

One year for implementation…

ladderThe final Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice have been published. Companies will be granted a one-year transitional period to align with and prepare for the implementation of the revised Codes.

Trade and Industry Minister Dr Rob Davies has stated that the amended codes are a “new beginning” aligned to government’s transformation ambitions and follow a period of much debate and which were earlier released in October last year.

The revised codes deliver a reduction of elements, from seven to five, within the generic scorecard, comprising ownership, skills development, enterprise and supplier development, management control and socioeconomic development, and changes to the points required for compliance.

Black ownership goes to 40%

The codes set the minimum requirement for ownership at 40% of net value, with skills development accounting for 40% of the total weighting points, and enterprise and supplier development required a sub-minimum requirement of 40% within each enterprise and supplier development element, namely preferential procurement, supplier development and enterprise development.

All companies, barring micro enterprises, will be required to comply with the five elements of the B-BBEE scorecard including  all organs of state and public entities; and  “natural or juristic persons who conduct a business, trade or profession in South Africa, which undertakes any economic activity with organs of state or public entities.”

There is an increased threshold in points required to achieve a better B-BBEE status and exempted micro enterprises have now a threshold of R10m and general companies, known as QSEs, have a range of R10m to R50m.

On the new enterprise and supplier development enterprises totalling 40 points, 23 points are required as black ownership majority. Procurement is down to 12 points, of which only five points relate to all suppliers with black economic empowerment credentials, three points to qualifying small enterprise suppliers and four points for exempt microenterprises with a 15% target each.

Commentators have pointed out that many companies acquire total, or at least most of their imported goods on international markets and this will place them a complete disadvantage. The amended codes outline in much more clarity that large companies are required to comply with all three priority scorecard elements – namely ownership, skills development and enterprise and supplier development.

Refer to articles in this category
http://parlyreportsa.co.za//bee/bee-comes-under-scrutiny/
http://parlyreportsa.co.za//bee/turnover-fines-employment-equity-breaches/
http://parlyreportsa.co.za//bee/mprda-bill-causes-contention-parliament/
http://parlyreportsa.co.za//bee/new-b-bbee-bill-avoids-circumvention-of-the-law/

Posted in BEE, Facebook and Twitter, Finance, economic, LinkedIn, Mining, beneficiation, Trade & Industry0 Comments

Uncertainty in oil and gas exploration industry

Oil and gas industry criticizes MPRDA Bill…

Government’s definition of what an  oil and gas industry stakeholder is and the continuous use of that mysterious word “player” have both come in for some serious investigation after the recent hearings into the Minerals and Petroleum Resources Development Amendment Bill, which aims to grab a stake in oil and gas exploration industry and combine the BEE charters of both the mining and liquid fuels industry with regard to employment and beneficiation.

The minister now announced that the state will be able, it will be pr0posed, to acquire at first 20% in successful gas exploration ventures  without capital outlay (called “free carry”) and subsequently 50%.

In the case of this Bill tabled in Parliament, after public comment, participation with industry stakeholders, such consultation with stakeholders has been claimed by the minister involved both in print in the written background to the Bill as part of the tabled document and by the departmental of mineral resources in  briefings to the portfolio committee concerned.

Generally, liquid fuels companies are concerned at the suggestion that if both BEE charters are combined it is like “combining water and oil”, to quote one member, since the mining industry is more labour intensive with massive capital outlay and the liquid fuels industry is twice as capital intensive but with less manual labour involved but greatly higher risk issues in capital outlay.

According to a number of oil and gas industry exploration companies vitally affected by the proposals contained in the Bill, any discussions with the gas exploration industry  has neither happened nor were they even notified.

State participation

Considering the fact that the Bill proposes acquisition by legislation of shareholding in those companies and regulations, as yet unpublished, will vitally affect not only their balance sheet but whether they enter into ventures in the first place, makes this is extraordinary.

One imagines that not only are eyebrows raised in the international world of trading and investment but some unfortunate comparisons made to other failed states in Africa.

Certainly there is a fear of exploitation in Africa and not without undue reason. Also it was hoped that one set of reasonable rules, known well ahead, would bring the kind of certainty that was needed to key worldwide industries and this would bring in turn South Africa to the top of list in investment destinations in an otherwise very unstable and avaricious stable of governments to our North.

Lack of certainty

From what has been said during the hearings on the Minerals and Petroleum Resources Development Amendment Bill, the minister would seem to be way off mark with this new Bill, some of those making submissions saying it was the first time they got their voices heard and others stating that some of the conditions are outrageous.

Whilst the terminology “hearings” is used for such sessions after a Bill is tabled, we just hope that the minister is listening.

Posted in Energy, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

MPRDA Bill brings changes in BEE and exploration rights

BEE consolidated

coal miningMoses Mabuza, when briefing Parliament on the Mineral and Petroleum Resources Development Amendment (MPRDA) Bill, told parliamentarians that amongst the many issues proposed by the new Bill an important issue was the setting up of penalties for non-BEE compliance across both the mining and liquid fuel sectors.

However, he said that he was confident that all stakeholders in the both industries would look back on a their association with black empowerment with understanding and pleasure, despite the opposition to the Bill on various differing and wide-ranging issues at present.

Bill will create right environment

Mabuza, who is deputy director general, mineral and policy promotion,department of mineral resources (DMR), said industry will be surprised see how much this legislation in the years to come will have contributed  to the country’s development, both in the mining, liquid fuels industry and business in general.    He told told the portfolio committee on mining resources, when briefing MPs on the Bill page by page, that it was important to understand government’s viewpoint as far as the oil and gas industry is concerned.

“We want to see that no partnerships created by the Bill are mutually exclusive or self interested”, he said. “We wish to create an environment where the state participates together with mining and gas industry with nation’s developmental objectives in mind.”

Blank cheque

“We give you the assurance”, Mabuza said, “that any regulations which are to follow will provide the kind of certainty sought in both the mining and petroleum industry”.

Opposition members still called to see the basis of the regulations first before further debate, since they claimed that at present, and as things stood, the wording of the Bill amounted to giving the state “a blank cheque” by not knowing what regulations were to be imposed.

The minister objected to this, saying that trust was called for and DMR would sit down with other departments and stakeholders and agree upon regulations within the framework  of the Act. “This is the only way things can work”, Mabuza said. “That is why the Act is a framework, with us all working from this plan.”

Working with stakeholders

In tracing the history of the MPRDA, deputy Mabuza and his co-presenter for policy development in DMR, Adrian Arendse, continually referred to stakeholder meetings throughout the process over the years, including stakeholder workshops where the various parties consulted were broken down into sectors such as environmental, petroleum industry, mining industry, finance and bankers and legal interests.

“We received commendable inputs from these workshops and in an overall sense, particularly where mining and petroleum was concerned and we have received both consensus and support for the proposals now before Parliament.”

Not conducive

Opposition parliamentarians denied this saying from what they had heard that there had not been overall consensus on many issues and the complete lack of uncertainty.   Lack of clarity on state motives was a total disincentive to investors, commented one MP.    Said another opposition MP, “Mining industry representatives have said in the media that this Bill will not grow the industry, so tell us why you think it will.”

Deputy director Mabuza, in response, again gave assurances from government that the proposed Bill represents no fundamental shift in government policy. He said clarity and certainty would follow in the course of time as regulations became evident.

Different horses on courses

Further on BEE matters, questions were asked on how government intended putting into force a parallel BEE charter that incorporated the liquid fuels charter, which called for less than 10% ownership as a target, and the mining charter which was at 27%, plus other anomalies.   One MP said that in gas exploration there were enormous developmental costs and the charter made no sense on these issues.

Mabuza said he was aware of the “vast differences” between the two documents and this would have to be discussed in rounds of talks to come and considered carefully. Some of those talks had already started, not referring with whom and on what particular subject.

However, he said there were also big differences in the industries themselves, in both matters of beneficiation and style of operations. DMR wanted to land up in a situation where nobody was disadvantaged, either the poor or the investor.

Exploration rights change

On exploration rights, Mabuza said where the Bill really differed from previous regimes was that the “first come first served” principle in exploration and rights licensing was to be abolished totally. “This system leads to mediocrity”, he said. “We have learnt much over the 15 years with such licensing regulations, during which time South Africa has lost it share in global resource exploration, going from 3% to a current 1%. We do not wish to go down this road any longer”, he said on licensing.

“The first person served often meets the absolute minimum requirements and in so many cases, South Africa has had years of brownfields investments and never the greenfields operations that number 5 or 20 in the queue might have offered for a license on the same project. Mediocrity resulted and South Africa has suffered consequently”, he said.

Mining and energy split

In answer to questions on the liaison between DMR and the department of energy (DOE), Mabuza described the sphere of control under the MPRD Act as being simply a question of “downstream” energy resources being for DOE and “upstream” matters on exploration mining licences and industry regulations being for DMR.  Obviously, he said, environmental issues were handled by those competent to do so.

Mabuza said that in coming up with the proposed Bill, DMR had consulted with, or observed, the practices of Canada, Angola, Ivory Coast, Russia and Gabon but opposition members complained that the process of consultation or observation meant absolutely nothing.   They want to know who DWEA had listened to in coming up with the current proposals.  Those before Parliament said they had made their own decisions and stakeholders had been involved along the road in discussions, particularly in the mining industry.

Planned for the future

Mabuza said that South Africa “remained the wealthiest mining and exploration production country in the world and with Africa reaching never-before, unprecedented levels of geo-political stability, the future was bright.   “We have designed legislation that takes both the state and our developmental economy into that future”, he said.

On the subject of penalties in the area of BEE non-compliance, opposition members complained that such contributed further to red tape, political uncertainty and investor complications.    Mabuza denied this and told parliamentarians that any penalties written into the Bill were a maximum sum only “and in any case”, he said, the 10% maximum still represented ‘just petty cash’ for most mining companies”.

“We had to bring in some form of penalty where shareholders were alerted to non-compliance otherwise management just carried on regardless of regulations or compliance issues”, Mabuza said.

Refer previous articles in this category
http://parlyreportsa.co.za//uncategorized/mineral-and-petroleum-development-bill-grabs-resources/
http://parlyreportsa.co.za//energy/draft-mprda-bill-for-comment/

Posted in BEE, Energy, Enviro,Water, Facebook and Twitter, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Trade & Industry0 Comments

BEE comes under media scrutiny

New BEE Codes & Bill to fill gaps…

rob daviesMinister of Trade and Industry, Dr Rob Davies, says the new BEE Amendment Bill and the revision of the Codes would go a long way in plugging the gaps that, in his view, businesses had taken advantage of with such moves such as fronting. The amendments would also avoid the “tick-box” manner of BEE compliance that seemed to be developing in the country, he said.

When asked about a time limit on BEE, he was clear in his reply.  “The eventual idea is to create a non-racial society in which these kinds of racial categories will no longer be considered. We are nowhere near putting a time limit on this happening”.

Now five code elements

He said that the new legislation and Codes would reduce the exorbitant amounts of money that small enterprises had to pay to consultants to prove BEE compliance. “The current generic scorecard contains seven elements and these have been reduced to five in order to align the elements more closely with the trajectory of the economic growth and development in the country.”

Minister Davies pointed out that in terms of the new Bill, about to be assented to by the President, had a total of 105 points assigned to the five elements.

Social imperatives

“Black economic empowerment is not just a social and political imperative”, he said. “We need to make sure that in the country’s economy, control, ownership and leadership are reflective of the demographics of the society in the same way the political space does. That’s why we are saying Black Economic Empowerment (BEE) remains an economic imperative.”

Minister Davies said the tandem launch of the Codes signalled the opening of a sixty-day period in which business and all other members of the public can submit their comments on the Codes for consideration before all the changes are finalised.

He concluded, when addressing a media conference on the subject, “We cannot expect to grow and develop as a country if the leadership of the economy is still in the hands of only a small minority of the society.”

BMF comes in

At the same meeting, Black Management Form’s Xolani Qhubeka, endorsed the amended Codes on BEE but warned “that whilst they area a step in the right direction, still more has to be done.”

The media asked whether, in stating that the new Bill had lightened the regulatory requirement for small business, whether this was because of the Bill or the new Codes.

Minister Davies indicated that the Codes were still under debate and this is “where reform would take place”. One of the areas being looked at was where bigger companies had to go through a lengthy verification process when dealing with smaller companies, he said.

“ Much of the comments are about the numbers, targets and the time to reach the targets but some of the fundamental principles will continue whilst the parameters and the timeframes are being discussed.”

All about fronting

When asked about the idea of incentivising plans for ownership as he perceived it, Minister Davies said this came back to the fronting question and what the problem with BEE, as it stood, was all about.

There was ownership as a proper and wholesome economic concept and there were also simple formal contract of some sort of shareholding, he said. “What has happened is that most of BEE is some kind of share transaction”.

He said his department was “weary” of empowerment of plans and new companies where  a kind of ownership had been established that was a share transaction deal. He said that BEE in its proper form had to deal with such subjects as procurement and skills training and added, “What we want to see is the entering into real ownership relationships with people who are empowered and can exercise the economic powers of ownership.”

BEE not a failure

On being asked whether, in introducing criminalisation to BEE legislation, he thought BEE had failed, Davies said “ We cannot conclude that BEE is a complete failure. I think that some aspects of it so far have showed some progress. We have seen the emergence of business people from historically disadvantaged communities playing leadership roles in business, state-owned enterprises, and government.”

“ What is lacking is the impact that was desired by the legislation originally. With any kind of legislation there will always be a need to tweak it. The fundamental difference between SA and other emerging economies is that people were subjected to racial categorisation. This had to do with social definitions. People were classified by the apartheid regime as white, black, coloured and Indian.”

“Depending on how one was classified through the Population Registration Act,” he went on, “ this defined your life chances; your education; your skills development and even for small business development. Apartheid neglected black small businesses until about ‘five minutes’ before the democratic transition.”

How long will it last

Questions then arose from the floor on the “sunset clause” issue, with one person saying that all this was 20 years ago, and people entering the economy had come through a new education system. Why could there not be term limits on this and why were there no deadlines, they asked on such legislation.

Minister Davies again referred to the past and brought up the 1913 Land Act and “the history of disempowerment of peasant farmers in the Transkei, who competed with white commercial farmers. One could clearly see how these farmers were disempowered and prevented from being commercial farmers so that they could be available to go work in the mines. Small black shop owners were not allowed to operate in the city centre and compete with the white shop owners.”

He acknowledged that it was twenty years since this had all had completely changed but the life span of disfranchisement effects has continued. “White people still have the best chances that other people do not have and this is the fact of the matter and is what have had to deal with.

Fronting penalties

When asked about the penalties on fronting, Minister Davies said at the moment as the law stood the only remedy was the common law offence of fraud; and, he added, fraud is criminally punished. “The only remedy at this point in time is the criminal one. And a maximum ten year sentence, subject to court process, is the legal process for cheating.”

Get rich quick

When it was pointed out by a questioner “that some people got richer through BEE regulations whilst a number of others stayed far behind”, Minister Davies responded by saying that BEE had to be got onto a “broader base” and this is why a Commission for BEE had been established.

He said, “You put somebody in a certain position so that you could pretend that the enterprise is something other than it is in terms of empowerment.” The Commission would look at this, he said, and in the worst case scenarios it would recommend that such cases go through the criminal justice system.

When asked when the Commission likely to be established the Minister explained the parliamentary process of legislation, the advertising of posts for a Commission and the setting up of procedures, all of which took considerable time.

More background articles on subject
http://parlyreportsa.co.za//bee/rumblings-in-labour-circles-on-bee/
http://parlyreportsa.co.za//bee/new-b-bbee-bill-avoids-circumvention-of-the-law/
http://parlyreportsa.co.za//bee/bee-bill-to-stop-fronting-tabled-in-parliament/

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